Secret credit scores you need to know about

FROM CONSUMER REPORTS ® By the editors of Consumer Reports

Published 11:24 am, Tuesday, January 21, 2014

FROM CONSUMER REPORTS ®

By the editors of Consumer Reports

That numerical expression otherwise known as the credit score is the absolute authority of your creditworthiness, right? Consumers seem to think so. Consumer Reports Money Adviser notes that every year we spend more than $1 billion to buy them, along with our credit reports.

But the FICO scores and others we can buy have less value than advertised. They’re not the same ones creditors actually use to make decisions about extending a loan or credit card to you.

Here’s another reason you shouldn’t waste your money on artificial credit scores: Car dealers, cellular service providers, credit card issuers, insurers, retailers, and other businesses rate you up, down and sideways using a whole slew of other scores.

And guess what? “The consumer has no way to proactively get these other scores, and there’s generally no obligation for businesses to share them,” says John Ulzheimer, a consumer credit expert at CreditSesame.com.

Last November, FICO, the company that invented its eponymous ratings in 1958, began letting customers of two lenders see the actual scores used to grant them credit. But the other behind-the-scenes scores remain secret.

Your legal safeguards may be near nil, but you can still protect yourself by knowing how businesses, data brokers and credit bureaus use your credit report and other information to keep tabs on you. Consumer Reports Money Adviser offers this rundown of some of the scores that are being used behind your back.

FICO Revenue Scores assess your likelihood of generating income on a credit card by using it a lot. Industry-specific credit scores focus on how well you handle specific kinds of debt obligations.

For example, the Equifax TIP Automotive Score cross-tabulates bad credit risk with a shopper’s true in-market propensity to actually buy, on a scale of 1 to 10, and also prompts dealers to push certain car models over others.

Deposit account scores are used when you open a checking account. Banks, which are still in the habit of authorizing account overdrafts so they can levy outrageous penalty fees, use ChexSystems QualiFile Scores to determine the likelihood that a customer will bounce checks (without the bank’s blessing) in the next year and which “bad” customers are worth keeping for an added “lift” from higher-fee “second-chance” accounts.

And there are more: Good customer or bad customer scores measure your profit and loss potential, while FICO Bankruptcy Scores aim to tip off lenders that you’ll still go bust despite your good payment history. FICO Transaction Scores monitor your credit card activity and look for money trouble behavior, such as taking out a series of cash advances.

WHAT TO DO

Although you can’t buy these scores, you should be able to see at least some of them if their use results in an “adverse action” that causes you to be denied credit or pay a price higher than you would otherwise. Consumer Reports Money Adviser suggests the following:

• Be on the lookout for those adverse actions, including being denied wireless or another utility service, being charged a higher-than-market rate for an auto loan or having your credit line reduced or cut off.

• Ask the business or lender if the action is the result of scoring. If it was, ask to see the score. If not, ask how it made the decision.

• Although there is debate over whether such things as a billed-later cellular or utility account or checking services qualify as credit under the Fair Credit Reporting Act, Consumer Reports Money Adviser believes that’s why businesses score you, so you should be entitled to see the number. If you don’t get it, file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint.

• To keep your secret back-office FICO scores in shape, that company advises you to pay all of your bills on time, every time; get revolving credit balances below 30 percent of your available credit line; and open new credit accounts only when necessary.